We’re currently experiencing serious technical problems on the site, and as a result are unable to update the news – even though our market data is running as per normal. We sincerely apologise for any inconvenience caused and hope to be up and running again this evening. Thank you for your patience in this regard.
– David McKay (editor) & team

The
Government Employee Pension Fund (GEPF) has maintained a healthy portfolio
despite a collapse in the Steinhoff share price and the impairment of certain assets,
board of trustees chair Dr Renosi Mokate has said.

Mokate noted the GEPF's
investment portfolio performance in a statement in the annual report for 2018,
tabled in Parliament on Monday.

The
PIC manages 87% of the GEPF's investment portfolio directly. The report
reflected growth of the investment portfolio by 8.3%, from R1.7trn in 2017 to
R1.8trn 2018. Investments yielded a return of 8.5% over the period, compared to
4.3% reported in 2017.

During the period, total benefits
paid to government employees increased by R6.6bn. Benefits are paid on a
member's resignation, retirement or death.

Mokate noted the "impressive
growth" of the investment portfolio, but added that the "proverbial
elephants in the room" could not be ignored – these being Steinhoff and
VBS.

Elephant
in the room

"As at 31 March 2017 the
GEPF, through PIC, owned about R28bn in Steinhoff International Holdings [JSE:SNH], which is about
10% of the shares of the company and 1% of the total assets of the GEPF.

"Notwithstanding the
collapse in the Steinhoff share, the GEPF portfolio remains financially
healthy, because of its diversified nature.

"It
is also important to note that GEPF members’ benefits will not be affected by
these developments, given that the GEPF is a defined benefit pension
fund," Mokate said.

The investment loss recorded,
following the collapse of the Steinhoff share on December 6, 2017, was 0.7%.

"The GEPF continues
monitoring the developments in the Steinhoff case and will report once the
investigations and hearings have been finalised," Mokate added.

Further to the PIC, Makote
commented on the bridging facility of R5bn it
extended to power utility Eskom for one month. "It was never an elephant,"
she said.

Eskom
repaid the loan, with interest, she confirmed.

"We believe that the
investment was in the best interest of the fund, and South Africa and its
economy seeing that failure of Eskom to service its debt would have resulted in
a cross-default, with catastrophic consequences.

"While the GEPF pursues good
risk-adjusted investment returns for the benefit of its members and pensioners,
it also recognises its role in the economic development of South Africa, Africa
and the world," she explained.

Impairments

Mokate also listed impairments of
certain assets.

This includes Lancaster 101 –
Steinhoff's BEE partner. "The impairment in Lancaster 101 is directly
linked to the collapse of Steinhoff’s share price," said Mokate. According
to the impairment schedule for 2018, the impairment of Lancaster is to the
value of R4.3bn.

The GEPF has also impaired
Independent News Media (INMSA) due to declining traditional print and
advertising revenue, among other things.

"The Sekunjalo term loan,
INMSA shareholder loan and Preference Shares were impaired as INMSA and
Sekunjalo did not honor their payment obligations under the transaction
agreements. Cost containment strategies are being implemented and the
investment continues to be closely monitored," she said. This impairment
is to the value of R1bn.

Further, Agri Poultry will be
impaired to the value of R491m. "The decrease in the recoverability of
these instruments was as a result of industry and operational challenges."